Platform Providers in the “Sharing” Economy

Image: Juliet Schor

by Juliet B. Schor and William Attwood-Charles

If one had any doubt that the “sharing economy” has become a real thing, the 2016 Presidential campaign should lay them to rest. In July Jeb Bush announced he would be using Uber on the campaign trail to show that that the “free market” can create jobs. Hillary Clinton, in her first major speech on economics, criticized gig economy platforms for failing to provide benefits.

For sociologists, these digital platforms are interesting because they are creating markets that connect people in new ways. The most important of these is Peer-to-Peer (P2P) exchange. The term comes from the open source software movement, and refers to open access communities of collaborating individuals. P2P exchanges occur between individuals, rather than a standard Business-to-Consumer or Professional-to-Consumer transaction. This is less true of Uber, where many drivers were already full-time drivers, including taxi drivers, than it is of Airbnb, a P2P lodging site, or Relay Rides, a P2P car rental site. On labor sites, such as Task Rabbit, Peers sell labor services to people who are looking for help in their home or business.

The promise of P2P platforms is that they create new economic opportunities for people to earn, in ways they can control themselves. This has proved appealing for many, especially in the aftermath of the 2008 financial crisis, the period when many of these sites were being launched. Potential downsides include the possibility that the platforms are accelerating a race to the bottom in labor markets, and that they represent a new frontier in the encroachment of the market into daily life.

With a team of PhD students from Boston College and Boston University we have been studying both non- and for-profit P2P platforms, including the three named above (Airbnb, Relay Rides and Task Rabbit). We began studying “providers” on these sites in 2013, and have done approximately 50 interviews, the majority in Boston. Demographically, the salient features of our sample are their youth, high education levels, and whiteness, which are all characteristics of platform participation throughout the country. Although such a small sample does not allow us to definitively answer many of the questions swirling around these platforms, we do have a number of suggestive findings.

“It takes money to make money.” As one might expect, Peers who come to these markets with more valuable assets earn more. Airbnb is the most lucrative of the three sites. Some of the hosts who have desirable apartments to rent out have earned $20-30,000 a year. But that requires assets—they either own the apartments or have the earning power to obtain expensive leases. They also need access to alternative living quarters while their places are rented. Similarly, Peers with expensive cars or highly valued skills are doing well. One Task Rabbit with good linguistic skills started a small translation business, and outsourced jobs to digital workers on other platforms. On the other hand, those who come to the platforms with skills that are widely available in the population (such as driving, housecleaning, doing deliveries) make much less. About half of the Task Rabbits we interviewed were people who already had jobs and were doing this work to earn extra money or were starting businesses and using the platform to supplement income.

Overall, our findings suggest that platform economies may be increasing inequality within the middle 80% of the income distribution. That’s because college-educated peers are taking on tasks traditionally done by those of lower educational status (eg., housecleaning, driving services provided by hotel staff). While the platforms are probably increasing demand for services to some extent, it is also likely they are displacing demand for lower-paid service sector workers.

“I mean like there are many times that you do this and you think, I’d be way better off working at McDonalds because I’d make the same amount of money and I’d have free fries.” Critics of the platforms argue that they offer substandard employment without benefits or income stability and encourage a race to the bottom. In 2013, our providers were not making such complaints. That’s partly explained by the favorable conditions in the early years: providers were mostly able to get as many exchanges as they wanted. Task Rabbits were reporting wages in the range of $20-25 per hour, far above minimum. Airbnb hosts told us that they could earn 3 to 4 times their monthly rental costs. And Massachusetts residents have health insurance. They loved the flexibility of the work, and in many cases, were enthusiastic about the sociability, especially on Airbnb.

We’ve got a bit of 2015 data on Task Rabbit which paints a less rosy picture. Many former Rabbits have left the platform, spurred in part by a change in the business model that set wages and took away flexibility. But that has also meant that in Boston the supply of Rabbits is relatively small which favors the remaining Rabbits. By contrast, Alexandra Ravenelle, who is studying Task Rabbit in New York, paints a grimmer picture (pdf), with much more competition for work, as does journalist Sarah Kessler, whose attempt to earn on the platforms in NY was unsuccessful. We’ve also encountered some unhappy Rabbits who are critical of the whole setup, from earnings to management policy, but remain because there are no jobs and Craigslist is even more problematic. In our view, the presence of so much excess supply in the low end of the labor market makes it likely that supply will generally outstrip demand on the non-specialized labor platforms, and attendant race to the bottom pressures.

“We had my in-laws for a month…so we lost a lot of money there.” For boosters of the sharing economy the ability to rent out slivers of one’s life—the apartment, car, a piece of photographic equipment, a couple of spare hours—is a boon. For critics, it’s hyper-commodification, a market encroachment into new domains that raises fears of crowding out genuine sharing and corrupting non-commercial culture. The Airbnb host who complained about the money she lost during her in-laws’ visit seemed to be verging on the latter. She, and others, also raised the scepter of greed and how the newfound opportunity to make money was sometimes irresistible. On the other hand, we found Airbnb hosts who also offer lodging on the non-monetized Couchsurfing platform and many who said the social aspects of the experience are as important as the money. Indeed, we are finding that people are using the platforms differently: some are classical homo economicuses, trying to squeeze every last dollar from the transactions. Others have mixed motives, with the desire for social connection being the most common. A third group has a more instrumental attitude and just need to earn a bit of extra money.

Whether there will be convergence in behaviors as these platforms institutionalize and norms develop is yet to be seen. If they do, and maximizing behavior comes to dominate, then the critics will have a point. Yet another area of social life will operate according to a market calculus. On the other hand, a community of founders and leaders in this sector seems determined to retain its ideological commitments to creating social connection and building a better, more humane economy and society. Whether they will prevail in the face of the powerful economic opportunities these new platforms offer remains to be seen.

Fascinating study! I hope you will be able to follow the same people over time, to see whether those with strong ideological commitments to creating social connections can actually sustain them, in the face of unrelenting market pressures & growing pleonexia in US society. Giving what happened to previous such experiments — I am thinking especially of the 1970s, with free clinics, free newspapers, free schools, etc. — I’m skeptical.